Question 1

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101:

Accepted Answer

This is true as per AASB 101, Extraordinary items are those that are outside the ordinary operations of the business or of a non-recurring nature.

Question 2

Comprehensive income includes dividend payments to shareholders.

Accepted Answer

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Dividend payments are distributions to owners, and thus not included in comprehensive income.

Question 3

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

Accepted Answer

The income statement is also known as the profit and loss statement, and it provides information on a company's revenue, expenses, and net income or loss for a specific period. It is a requirement of the Corporations Act 2001 for companies to prepare and present a profit and loss statement. Therefore, the income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement'.

Question 4

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Accepted Answer

A prior period adjustment is recorded directly to retained earnings in the statement of changes in equity but is also reported as an item of other comprehensive income for presentation purposes.

Question 5

According to AASB 101,the income statement provides a total profit figure to which opening retained earnings is added and from which dividends are deducteD.

Accepted Answer

According to AASB 101, the income statement provides information about the financial performance of an entity during the reporting period, but it does not provide a total profit figure. The statement of comprehensive income provides a subtotal of profit or loss for the period, but this is not the total profit figure. Additionally, dividends are not deducted from this subtotal or from the opening retained earnings. Dividends are typically declared and subtracted from the retained earnings balance separately, outside of the income statement.

Question 6

AASB 101 requires profit or loss and the total comprehensive income for the period reported on the face of the statement of comprehensive income to be disaggregated between the non-controlling interest and the owners of the parent.

Accepted Answer

This statement is true. AASB 101 requires that profit or loss and total comprehensive income should be reported on the face of the statement of comprehensive income, and this should be disaggregated between the non-controlling interest and the owners of the parent.

Question 7

AASB 101 permits an entity to present all items of income and expense recognised in a period to be presented in either the statement of comprehensive income or the income statement.

Accepted Answer

The answer of AASB 101 permits an entity to present...

Question 8

In establishing the classification of items in the income statement,the size of an item is an appropriate basis for establishing a separate classification (by nature or function)for it:

Accepted Answer

The size of an item alone is not an appropriate basis for establishing a separate classification for it in the income statement. Items should be classified based on their nature or function, and the size may be one factor considered in determining how to present the information.

Question 9

The income statement under AASB 101 is designed to report all revenues and expenses to determine profit or loss.

Accepted Answer

The answer of The income statement under AASB 101 is...

Question 10

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):

Accepted Answer

The answer of All adjustments to equity other than those...

Question 11

All disclosure requirements that relate to an entity's profit or loss are included in AASB 101:

Accepted Answer

AASB 101 covers the presentation of financial statements and provides guidelines on their structure and minimum requirements for their content, not all specific disclosure requirements related to profit or loss, which may be covered under other standards.

Question 12

By focusing only on the income statement,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the perioD.

Accepted Answer

The income statement only presents the financial performance of an entity for a certain period, and it does not reflect all the financial activities that may have impacted the entity. For example, changes in the balance sheet and cash flow statement are not captured in the income statement. Therefore, to obtain a complete understanding of the financial position of an entity, it is essential to analyze all the financial statements.

Question 13

The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made:

Accepted Answer

The choice between reporting expenses by nature or by function does not affect the net profit figure, as it is merely a presentation choice in the income statement. The total expenses remain the same, only the way they are classified and presented changes.

Question 14

AASB 2 requires that the fair value of the option issued as a share-based payment to an employee,be determined and this value be deemed to be the cost of the options:

Accepted Answer

AASB 2 requires the fair value of the option issued as a share-based payment to an employee to be determined, and this fair value is deemed to be the cost of the options.

Question 15

Total comprehensive income for the year is profit for the year plus comprehensive income.

Accepted Answer

Total comprehensive income includes both gains and losses that are not included in the calculation of net profit, such as changes in the value of investments or foreign exchange gains/losses. Therefore, total comprehensive income for the year is profit for the year plus any other comprehensive income.

Question 16

AASB 101 permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Accepted Answer

AASB 101 indeed permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Question 17

As part of the process of international harmonisation,standard setters have removed the need for professional judgement to be exercised in respect of expenses; all discretion that once existed has been removed.

Accepted Answer

This statement is false. International harmonisation aims to reduce inconsistencies in financial reporting standards across countries and regions, but it does not eliminate the need for exercise of professional judgement by accountants and auditors. In fact, the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) explicitly state that professional judgement may be necessary in the application of their requirements. Expenses, like all other aspects of financial reporting, may require judgement in their recognition, measurement, and disclosure.

Question 18

All expenses from operating activities must be classified according to either their nature or function:

Accepted Answer

The answer of All expenses from operating activities must be...

Question 19

If the exercise (strike)price of a call option is greater than the current share price,the option is said to be 'in-the-money':

Accepted Answer

If the exercise price of a call option is greater than the current share price, the option is said to be 'out-of-the-money'. If the current share price is higher than the exercise price, the option is said to be 'in-the-money'.

Question 20

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation:

Accepted Answer

Profit only takes into account financial gains and does not consider other factors that contribute to the success of an organization, such as customer satisfaction, employee engagement, and social responsibility. Therefore, profit alone may not be a true indicator of an organization's success.

Quiz 17: The Statement of Comprehensive Income and Statement of Changes in E